7 Zijbemr Vol2 Issue2 Feb2012

ZENITH International Journal of Business Economics & Management Research
Vol.2 Issue 2, February 2012, ISSN 2249 8826 Online available at http://zenithresearch.org.in/
AN ANALYSIS OF INDIAS EXPORTS (1991-2006)

DR. KULWINDER SINGH*; DR. SURINDER KUMAR SINGLA**
*Assistant Professor, Baba Farid College, Bathinda, Punjab, India. **Project Associate, CSWAS, Punjabi University, Patiala, Punjab, India.
ABSTRACT Indian economy has been experienced globalization in the sense that it is fastly integrating with world economy. India commenced its major thrust towards globalization in July 1991, with two simultaneous forces, unilateral and multilateral playing a pivotal role. Over more than one and a half decade of reforms and a decade of WTO regime, Indias exports grew at an average of 11.56 per cent per annum (in US $ terms). In the context of the phenomenal expansion in world exports (7.32 per cent), this growth of Indias exports was relatively much higher and Indias share in world exports grew continuously from 0.56 per cent in 1991 to 1.07 percent in 2006. The analysis of instability shows that majority of India's exports experienced high growth and low earnings instability. Further, export instability was primarily due to the dominance of quantity variables. Demand for India's export has subject to relative prices and income of importing countries during the concerned period. The analysis based on the relative prices of India's overall exports and market share indicates increasing price competitiveness of India's exports in global export market. The analysis based on the RCA and RSCA indices reveals competitive advantage in majority of selected commodities. The constant market share analysis makes it clear that increasing world demand (World Demand Effect) for exports has played a significant role in the India's outstanding export performance. Apart from expanding world demand, India's export performance primarily has been attributed to competitiveness of exports. Deepening of reforms into specific export sectors would stimulate India's export; result compositional and geographical diversification; help to remove supply bottlenecks operating in the economy and help improving export competitiveness. www.zenithresearch.org.in KEYWORDS: Indias Exports, Economic reforms, Multilateral Trading System, Regional Trading Agreements, Supply bottlenecks, WTO. ______________________________________________________________________________ INTRODUCTION Export sector is considered as a catalyst agent for sustaining and accelerating process of economic growth (Aggarwal, 1982). Countries devote home resources to exports because they can obtain more goods and services by international exchange than they would from the same resources devoted to direct home production. Depending upon marginal propensity to consume and propensity to import, exports have multiplier effect on gross national income (Bannock et al., 1992). Exports, by fostering specialization helps to benefit from comparative advantage;
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utilizing the full capacity of plant size where domestic demand is less than full capacity production; getting benefit of greater economies of scale due to large market; expanding aggregate demand; increasing the rate of investment and technological changes; enabling import of essential raw materials and capital goods, result industrialization and thus rapid economic growth in developing economies (Chennery, 1979; Kavoussi, 1984; Ram, 1987; and Moon, 1998). Indian economy has been experienced globalization in the sense that it is fastly integrating with world economy (Parikh and Radhakrishanan, 2004-05). India commenced its major thrust towards globalization in July 1991, with two simultaneous forces, unilateral and multilateral playing a pivotal role. This New Trade Regime is a momentous in Indias economic history as it witnessed a successful transition of India from a closed, slow growing economy to a open economy that has now found a place amongst the fastest growing economies in the world. Unilateral economic reforms were undertaken with regard to exchange rate, foreign investment, external borrowing and foreign trade policy (Chadha et al., 1999). Trade reforms formed an integral part of the overall structural reform process (RBI, 2001-02). The multilateral aspect of Indias trade policy refers to Indias commitments to the World Trade Organization (WTO) with regard to trade in goods and services, Trade Related Investment Measures (TRIMs), Trade Related Intellectual Property Rights (TRIPs). This open trade regime has been viewed as the least vulnerable form of globalization with enormous opportunities for higher growth emanating from higher exports (Krueger, 1998). Exports, being a major part of India's foreign trade, have assumed a place of paramount importance and play a significant role in economic development process through generating investible surplus and financing imports by earning foreign exchange (Kaur, 1993). Declining from respectable share of 2.00 per cent to 0.50 per cent during 1950-60, and hovering around 0.50 per cent during 1960-90, Indias share in world merchandise export has increased from 0.56 per cent in 1991-92 to 1.07 per cent in 2005-06. Trade policy reforms in recent past with their focus on liberalization, openness, transparency and globalization as well as creation of WTO have provided an export friendly environment with simplified procedure for trade facilitation (Economic Survey, 2004-05). OBJECTIVE AND RELEVANCE This paper attempts to examine the impact of export policy reforms on various aspects of Indias exports. This paper covers the period 1991 onwards. The period to be covered under the study has been characterized by vigorous changes within the economy as well as at global level. The economic environment during this period has dramatically been changed within the economy following economic policy reforms of 1991. Apart from various economic reforms undertaken since 1991, Indian economy has also had to reorient itself to the changing multilateral trade discipline at global level with newly written WTO framework. Creation of WTO through Uruguay Round (1986-94) brought out renewed order to the Multilateral Trading System by applying multilateral disciplines, has provided a lot of scope as well as challenges for export expansion. An attempt has made to decipher and quantify the impact of this domestic and global economic transformation on various aspects of Indian exports. The relevance of the paper is further enhanced taking into account increasing popularity of regional trading agreements at global level and particularly in Asian region, which opened the opportunities for countrys export sector to reap the benefits of comparative advantage, lower tariff and non-tariff barriers.
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RESEARCH METHODOLOGY AND DATA SOURCES The paper is entirely based on the secondary data. The attempt is to present a comprehensive picture of Indian export sector by putting the things in a most disaggregative manner. A representative bundle of 30 commodities at SITC digit-3 has selected by taking into account their continuous presence in Indias exports basket, which constitutes more than 75 per cent of India's exports during the concerned period. Selected commodities are: Fish (fresh & simply preserved) (SITC-031); Rice (SITC-042); Fruits (fresh and nuts excluding oil) (SITC051); Tea and mate (SITC-074); Feed-stuff for animals excluding unmilled feed-stuff (SITC081); Iron ore & concentrates (SITC-281); Petroleum products (SITC-332); Organic chemicals (SITC-512); Synthetic organic dyestuffs, natural industries (SITC-531); Medicinal & pharmaceutical products (SITC-541); Plastic materials; regenerated cellulose (SITC-581); Chemical materials and products (SITC-599); Leather (SITC-611); Articles of Rubber (SITC629); Textile yarn and thread (SITC-651); Cotton fabrics (woven) (SITC-652); Textile fabrics (woven) (SITC-653); Made-up articles, wholly or chiefly (SITC-656); Floor coverings, tapestries, etc. (SITC-657); Lime, cement & fabric building materials (SITC-661); Pearls (precious and semi-precious) (SITC-667); Ingots & other primary forms of iron (SITC-672); Iron and steel bars, rods, angles etc. (SITC-673); Universals, plates and sheets of iron (SITC-674); Copper (SITC-682); Machinery and appliances (non electric materials) (SITC-719); Electric power machinery and switch (SITC-722); Road motor vehicles (SITC-732); Clothing (except fur clothing) (SITC-841); Footwear (SITC-851); and Jewellery and gold/silver (SITC-897). Export growth, both in terms of value and volume, have been calculated by using the exponential function. Export Instability Index (EXPII), defined as the standard deviation of the observed deviation from the estimated exponential time trend, has been used to examine the instability of exports. The components of the variance of the logarithm of earnings are examined in case of selected export commodities to assess the relative importance of price and quantity fluctuations. The elasticity indices have been calculated for the exports by using the double-log specification with the method of least square, which provides direct estimates of the magnitude and nature of elasticities both for the price and income variables. In order to test the overall significance of regression equation, the coefficient of determination (r2) has been tested with the help of F-test. The first order regressive form of autocorrelation has been tested with the help of D-W statistics. T-test has also been calculated to test the significance of individual coefficients. The competitiveness of exports has been assessed by using relative prices and global market share; and Revealed Comparative Advantage (RCA) and Revealed Systematic Comparative Advantage (RSCA) indices. Constant Market Share (CMS) model has been used to examine sources of India's export performance during the period. Major data sources are as follow: Monthly Statistics of Foreign Trade, Directorate General of Commercial Intelligence and Statistics (DGCI&S), Calcutta; Economic Surveys, Ministry of Finance, Government of India (GOI), New Delhi; Handbook of Statistics on Indian Economy, Reserve Bank of India, Bombay; International Financial Statistics, International Monetary Fund (IMF), Washington D.C.; Comtrade-WITS (World Integrated Trade System), United Nations Organization (UNO), New York; Direction of Trade Statistics, IMF, Washington D.C.
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ECONOMIC REFORMS, WTO AND EXPORT RELATED ISSUES After the severe macro economic crisis, a serious attempt was made to free up trade, domestic competition and technology inflow and attract foreign investment (Joshi and Little, 1996). A major objective of the trade reforms has been to reduce and eventually eliminate the gap between domestic and export profitability. The focus of the export policy, by and large, shifted from product-specific incentives to more generalized incentives based primarily on the exchange rate. A major element of this policy shift was the downward adjustment in the exchange rate of the rupee against the major currencies in July 1991. Further rupee was devalued twice in July 1991 leading to 20 percent depreciation in its value. It was held that a more realistic exchange rate would make exporting inherently more attractive. In 1993, the government adopted full convertibility of the rupee on the current account. The exchange rate was henceforth to be determined by demand for and supply of foreign exchange in the foreign exchange market (Veeramani, 2007). Exports were encouraged more actively, quantitative restrictions on imports were relaxed (though not removed, particularly on consumer goods) and tariffs (particularly on industrial inputs and capital goods) lowered. The government eased domestic licensing, and gave large private firms greater freedom to grow. It also launched a somewhat reluctant privatization process. The trade regime inward oriented import substitution is now replaced with outward oriented export promotion. New foreign equipment and technologies are more accessible and there is a significant rise in inward foreign direct investment. Custom duties were cut drastically. Tariffs on capital goods and intermediate goods were significantly brought down to 25 per cent and 40 percent respectively. In 1992-93, EOUEPZ system was expanded to agricultural and allied exports. An electronic Hardware Technology Park Scheme was introduced on par with the EPZ in 1994-95. Special Economic Zone (SEZ) policy was announced on April 2000 to overcome the shortcomings of EPZs such multiplicity of controls and clearances, absence of world class infrastructure and instable fiscal regime. SEZ policy act 2005 supported by SEZ rules came into effect on February 10, 2006 (Economic Survey, 2006-07). Further these reforms also include sufficiently large export credit at internationally competitive rates, creation of private bonded warehouses, green channel facility for speedy clearance for certain categories of exporters and importers, special import license to import items from the restrictive list as a reward to exporters for superior performance and quality maintenance, introducing a new category of Super Star Trading House (SSTH) to reward large exporter and relaxing or removing restrictions relating to agro-exports. The forgoing policy changes are an indication to create an environment that will enhance the competitive strength of Indian export in international market (Kaundal, 2006). Besides trade policy reforms, establishment of World Trade Organisation in 1995 has also led to steep reduction in tariffs and non-tariff barriers to trade in all the member countries. The concept of Free Trade Zone was accepted in 1999-2000 and Foreign Exchange Management Act (FEMA) was introduced in June 1, 2000 replacing the earlier Foreign Exchange Regulation Act (FERA). Seattle (1999) ministerial conference launched new round of multilateral negotiations focused of agriculture, services and intellectual property rights. Due to the failure of the third conference, fourth conference at Doha (2001) presented Doha Development Agenda (DDA), especially related to Agreement on Agriculture (AoA). But, majority of the commitments related to Doha round are still in deadlock even after the Cancun (2003) and Hong Kong (2005) ministerial conferences. Newly emerged non-tariff barriers such
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as safeguards measures such as anti dumping duty, countervailing duty; Technical Barriers to Trade-SPS; environmental standards; labour standards and intellectual property rights etc. have widespread implications for Indian agricultural and manufactured exports. GROWTH AND STRUCTURE OF INDIA'S EXPORTS Indian exports have responded sharply to the export policy reforms and WTO establishment. Indias exports have increased sharply from Rs. 44042 crore in 1990-91 to Rs. 456418 crore in 2005-06. Exports as percentage of GDP (at market price) increased from 5.80 per cent in 1990-91 to 10.80 per cent in 2005-06. Export to import ratio has improved from 66.2 percent in 1990-91 to 80.7 percent in 2005-06 and trade deficit (as percentage of GDP) also reduced continuously from 3.00 percent in 1990-91 to 2.50 per cent in 2005-06. Over more than one and a half decade of reforms and a decade of WTO regime, Indias exports grew at an average of 11.56 per cent per annum (in US $ terms). In the context of the phenomenal expansion in world exports (7.32 per cent), this growth of Indias exports was relatively much higher and Indias share in world exports grew continuously from 0.56 per cent in 1991 to 1.07 percent in 2006. It clearly highlights that actual growth of exports has been quite higher than its potential growth during the study period. India's Export growth has been mainly attributed to the rapid growth of world export and exchange rate depreciation during 1991-95 (Mirjit and Chaudary, 1997 and Srinivasan, 1998). The decline in growth rate of Indias exports during the second half of 1990s (1996-2000) is mainly attributed to East Asian crisis, which has put a strain on India's exports not only by shrinking world demand but by also adversely affecting international competitiveness of India's exports due to sharp depreciation of East currencies (Kumar, 1998). Tremendous growth of India's exports during the 2001-2006 has attributed to their competitiveness. However, export growth (11.51 per cent in Rs. terms) was lower than that of import growth (12.14 per cent in Rs. terms). It reflects a continual tendency for the economy's resources utilization to exceed the amount of resources generated within the economy (Kaundal, 2006), but even then it is significant to narrow down the ever increasing trade deficit (Table 1). TABLE 1: INDIAS EXPORT VIS--VIS INDIA'S IMPORTS, TOTAL TRADE AND WORLD EXPORTS India's Year Exports (in Rs. Crore) 1991-92 1992-93 1993-94 1994-95 44042 53688 69751 82674 India's Imports (in Rs. Crore) 47851 63375 73101 89971 Total Trade (in Rs. Crore) 91893 117063 142852 172645 Indias Exports* World Exports* Share in World* Exports 0.56 0.60 0.65 0.68 www.zenithresearch.org.in
(In US $ Billions) (In US $ Billions) 16.15 17.06 19.61 21.97 3155.51 3324.37 3477.56 3864.64
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1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
106353 118817 130101 139753 159561 203571 209018 255137 293367 375340 456418
122678 138920 154176 178332 215237 230873 245200 297206 359108 501065 660409
229031 257737 284277 318085 374798 434444 454218 552343 652475 876404 1116827
25.26 27.22 31.08 31.97 34.65 42.63 47.43 52.1 57.22 64.8 79.63
4201.88 4465.64 4961.97 5126.51 5464.89 6385.56 6382.49 6636.68 7036.22 7849.51 8427.65
0.68 0.68 0.68 0.65 0.70 0.76 0.77 0.88 0.90 0.95 1.07
Average Annual Growth Rates (AAGR) 1991-2006 1991-1995 1996-2000 2001-2006 11.51 16.12 8.68 13.55 12.14 22.12 8.85 21.45 11.87 19.28 8.79 17.92 11.66 16.55 8.96 13.89 7.32 7.50 8.46 7.51 -----
Note: *Values are related to Calendar Years. Source: Handbook of Statistics on Indian Economy, RBI. Yearbook, IM F (Various Issues). Direction of Trade Statistics www.zenithresearch.org.in
Share of primary exports in overall exports has steeply declined from 22.04 per cent in 199194 to 15.87 per cent in 2003-06 (T.A) with rate of growth of 8.11 per cent per annum from 1991 to 2006. The share of agricultural exports declined steeply from 17.65 per cent to 10.62 per cent with growth rate of 6.68 per annum and of iron & ores increased moderately from 4.39 per cent to 5.26 per cent during the same period with growth rate 12.16 per cent per annum. The Share of manufactured exports firstly increased from 74.74 per cent in 1991-94 (T.A) to 78.06 per cent in 1997-2000 (T.A) and then decreased to 73.01 per cent in 2003-06 (T.A). Share of petroleum export has fabulously increased from 2.23 per cent to 8.42 per cent with rate of growth of 24.97 per cent per annum during the study period. Leather (4.52 per cent) and Textile (8.11 per cent) exports experienced lower growth amongst manufactured exports and rapid decline in their relative shares overall export earnings (Table 2). Persistence of the MFA quota has imposed
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constraints on Textile exports and relative decline in growth rate vis--vis non-quota sectors (Chakraboty and Chakraboty, 2005). Manufactured exports and petroleum exports experienced high growth as compared to primary exports during the post-reforms period. Thus, performance of Indias primary exports (except iron and ores) has been quite poor in comparison to manufactured exports. Increasing share of petroleum products in Indias exports is a tremendous achievement for Indias export sector and needs special attention for further expansion. The poor performance of India's agricultural exports has been particularly due to East Asian crisis as their growth rate found to be negative (in case of majority of agricultural exports) during 1996-2001. TABLE 2: COMPOSITION OF INDIA'S EXPORTS (1991-2006) (PERCENTAGES) Percent Share 199 1Commodity 199 4 I. Primary products 199 7 200 0 20. 18 17. 44 7.9 6 6.5 3 17. 10 0.0 0 1.4 9 3.8 3 7.4 200 3 16. 28 13. 20 5.9 2 3.7 6 13. 33 3.8 9 0.3 7 3.0 7 6.7 200 6 15. 87 10. 62 4.4 6 3.1 5 14. 52 3.9 9 3.4 2 3.1 4 5.7 200 6 8.1 1 6.6 8 0.0 9 2.3 2 9.2 2 39. 48 1.7 4 5.1 3 4.0 199 5 15.1 9 17.0 2 7.41 39.7 6 36.4 8 32.8 8 16.2 4 9.35 10.7 200 0 1.93 2.33 6.09 9.40 6.59 5.88 49.0 4 2.35 10.9 199 4199 7200 0200 3199 1Growth Rates 199 1199 62001 2006 12.7 1 4.40 5.41 1.41 8.52 22.9 2 168. 87 5.39 2.51
22.0 22.2 4 1 17.6 18.5 5 6 11.4 5.79 9 4.22 7.06 10.1 14.8 7 5 0.57 1.66
A Agriculture and allied . products 1 2 3 Tea Coffee Rice
Wheat
Cotton raw including waste
3.68 2.84
6 7
Tobacco Cashew including
4.55 2.41 8.37 6.92
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cashew nut shell liquid 8 Spices 4.52 4.48 15.6 13.1 9 5 3.71 2.75
2 6.4 8 9.4 5 2.3 9 2.9 8 18. 84 0.4 3 3.2 5 11. 85 2.7 4 39. 15 1.0 8 59. 77 78. 06 6.0
5 5.4 5 6.7 0 3.5 0 4.6 0 21. 88 4.5 9 4.6 2 11. 58 3.0 8 36. 09 0.7 1 63. 19 76. 51 5.3
3 4.7 0 9.6 0 4.8 7 3.6 4 16. 73 1.7 7 5.3 5 14. 94 5.2 6 57. 91 0.5 1 41. 58 73. 01 4.0
6 7.6 8 0.9 3 9.2 9 10. 49 5.9 6 5.6 8 12. 58 14. 09 12. 16 11. 94 4.0 6 12. 07 11. 38 4.5
4 13.3 9 14.1 3 4.72 32.8 0 18.6 5 0.99 19.0 9 33.2 5 7.80 1.75 12.0 9 20.0 0 16.7 3 9.07
9 3.78 20.2 4 3.98 1.45 17.5 5 12.1 0 3.20 3.85 41.2 6 14.0 8 16.9 6 37.7 8 61.6 7 4.06 18.0 4 11.2 4 0.60 www.zenithresearch.org.in
Oil meals
10 Fruits and vegetables Processed fruits, juices, 11 miscellaneous processed items 12 Marine products
2.39 3.85 19.2 19.9 2 1 2.43 2.46
2.12
6.29 31.6 8 10.7 7 8.04 0.29 9.02 6.45
13 Sugar and molasses
14 Meat and meat preparations 15 Others B. 1 Ores and minerals Iron ore
2.83 3.01 6.15 8.85 4.39 3.65 54.5 42.2 4 0 1.22 0.67 44.2 57.1 4 3 74.7 75.2 4 4 9.57 7.27
Mica
Others
6.04 10.3 8 5.66
II. Manufactured goods A. Leather and manufactures
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1 B. C. Chemicals and related products Engineering goods 15.0 15.3 5 6 19.3 18.6 6 2 37.7 34.6 5 0 15.2 21.1 5 9 2.08 1.88 15. 98 18. 25 33. 84 22. 79 2.2 3 0.9 0 0.4 6 1.3 0 100 .0
3 17. 93 21. 05 30. 77 21. 95 1.8 4 1.1 3 4.6 4 2.5 7 100 .0
6 20. 11 28. 03 23. 77 21. 96 0.7 6 1.3 2 8.4 2 2.7 0 100 .0
2 14. 77 15. 31 8.1 1 16. 21 4.6 3 15. 05 24. 97 21. 88 11. 51 20.2 1 18.1 9 15.2 2 18.3 4 16.1 7 31.1 1 0.38 20.1 4 16.1 2 11.5 6 8.43 8.61 15.3 6 11.7 3 9.67 7.42 35.5 8 8.68 14.9 9 22.4 9 2.05 10.8 4 17.9 5 16.2 6 41.9 7 13.4 3 13.5 5
D. Textile and textile products E. Gems and jewellery Handicrafts(excluding handmade carpets)
F.
G. Other manufactured goods II I. Petroleum products
0.94 1.09 2.23 1.48 1.05 1.06 100. 100. 0 0
I Others V. Total Exports
Source: Handbook of Statistic on Indian Economy, RBI (Various Issues). The share of OECD countries, except North America, in Indias overall export earnings declined continuously over the period under study. EU has lost its respectable share in Indias exports earnings. Similarly, the share of formerly East European countries also registered a quick decline. Developing countries and OPEC both emerged as the potential markets for Indian exports with their increasing shares. The share of Africa and Asian developing countries, particularly SAARC region, too showed an upward trend and these countries has emerged as the good markets for Indian exports. India's export growth to developing countries (15.70 per cent) has found to be much higher than that of the export growth to developed countries (9.07 per cent) during 1991-2006 (effect of the East Asian Crisis is evident during 1996-2001). On the eve of economic reforms, Germany, U.K, Japan and Russia were respectable destinations for Indias exports, but they lose their place with their continuously decreasing shares in Indias total exports earnings. However, the share of U.S.A declined during the last couple of years, but it remained number one destination for Indian exports during the whole study period. On the other hand, the share of U.A.E and China rose quite fabulously and both the countries reached at number two and three position respectively as export destinations during the study period.
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Having negligible share in Indias export earnings in 1991, China alone emerged as the leading market for Indian exports during post-reforms period. Hong Kong also registered an increase in its share in Indias exports. Singapore registered a remarkable increase in its share in India's export earnings (Table 3). Directional change toward developing countries may be attributed to Indias involvement in regional trading agreements particularly with developing countries, liberalization of economies in Asia and Africa and impact of WTO commitments on trade policies of member countries. However, there is a compositional change (within the broad product groups) and geographical change (within the major markets) during post-reform period (Table 2), but the analysis of concentration of exports, using Hirschman-Gini's index, asserts that Indias exports have concentrated to a small number of commodities and markets and thus India has failed to diversify its exports and export destinations. TABLE 3: DIRECTION OF INDIA'S EXPORTS (1991-2006) (PERCENTAGES) Percent Share 1991- 1994- 1997- 2000- 2003Group / Country Developed Countries Australia Belgium Canada France Germany Italy Japan Netherlands 1.15 3.74 1.04 2.40 7.24 3.11 8.27 2.21 1.22 3.51 1.01 2.23 6.17 3.08 6.89 2.40 1.17 3.69 1.41 2.37 5.26 3.13 4.99 2.33 0.65 2.26 0.98 1.52 2.90 1.93 2.64 1.39 0.86 2.87 1.07 2.01 3.62 2.63 2.54 2.11 8.40 9.28 12.8 0 10.1 0 5.05 9.71 1.03 10.7 0 18.1 0 15.0 0 13.8 0 14.2 0 11.4 0 15.4 0 9.66 19.5 0 2.32 8.40 1994 1997 2000 2003 2006 Growth Rates 1991 1991 1996 2001 2006 1995 2000 2006
9.65 10.10 19.0 0 4.41
11.4 0 11.90 1.24 8.17 www.zenithresearch.org.in
9.29 11.60 1.30 2.27
3.77 17.70
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Russia U.K. U.S.A. Developed Countries Total Developing Countries Bangladesh China, PR Hong Kong Indonesia Malaysia Saudi Arabia Singapore South Korea Sri Lanka Thailand U.A.E.
5.12 6.37 17.80 58.40
2.92 6.29 18.70 54.40
2.48 5.74 21.30 53.90
1.17 3.47 14.50 33.40
0.86 4.68 17.10 40.40
2.30 8.39 11.6 9.07
6.10 15.7 0 17.6 0 14.9 0
3.95 11.00 3.98 12.60 11.9 0 4.71 7.87 9.71
1.89 0.76 4.39 0.87 1.09 2.15 2.91 1.07 1.20 1.36 4.58
2.78 1.28 5.68 1.64 1.30 1.63 2.89 1.41 1.36 1.46 4.57
2.32 1.60 6.00 0.9 1.19 2.11 1.87 1.19 1.36 1.06 5.37
1.52 1.94 3.81 0.86 0.99 1.27 1.63 0.78 1.11 0.90 4.24
2.1 5.97 4.62 1.57 1.27 1.74 4.46 1.41 1.91 1.14 8.39
11.1 0 33.0 0 12.0 0 15.1 0 13.2 0 10.5 0 14.1 0 12.8 0 15.5 0 10.1 0 17.1 0
34.1 0 55.9 0 33.0 0 44.8 0 18.9 0 7.16 21.4 0 20.9 0 22.8 0 24.6 0 19.1 0
1.45
4.51
5.39 50.20 12.4 0 7.44
8.30 15.90 3.96 2.86
10.4 0 11.30 1.50 42.90 0.50 25.70 8.50 20.40 8.52 4.04 www.zenithresearch.org.in
16.7 0 26.70
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Developing Countries Total Others Total
22.30 19.32 100.0 0
26.00 19.61 100.0 0
25.00 0 21.16 100.0 0
19.10 47.53 100.0 0
34.60 25.07 100.0 0
15.7 0 11.5 1
26.8 0 16.1 2
7.71 20.00 -
8.68 13.55
Source: Handbook of Statistic on Indian Economy, RBI (Various Issues). GROWTH AND INSTABILITY OF INDIAS EXPORTS Except the six commodities: Fish (SITC-031), Fruits (SITC-051), Tea and mate (SITC074), Feed-stuff for animals (SITC-081), Woven cotton fabrics (SITC-652), and Floor coverings, tapestries, etc. (SITC-657), all other commodities registered high rate of growth. Among selected 30 commodities, majority of the commodities except Iron ore & concentrates (SITC281), Petroleum products (SITC-332), Ingots & other primary forms of iron (SITC-672) and Copper (SITC-682) experienced low instability. It means that majority of India's exports (selected commodities) experienced high growth and low earnings instability during post-reform as well as post-WTO period. The analysis of instability of Indias exports further show that export instability was primarily due to the dominance of quantity variable in case all the selected commodities except five commodities: Tea and mate (SITC-074), Feed-stuff for animals (SITC081), Articles of rubber (SITC-629), Universals, plates and sheets of iron (SITC-674) and Electric power machinery and switch (SITC-722), in which instability was caused by price variables during the study period. TABLE 4: EXPORT GROWTH, INSTABILITY, ROLE OF PRICE AND QUANTITY IN EXPORT INSTABILITY AND STABILIZATION EFFECT: SELECTED COMMODITIES (1991-2006) Export Commodit y Code SITC-031 SITC-042 SITC-051 SITC-074 SITC-081 Export Earnings Growt h 4.96 9.81 5.66 0.24 3.9 Instabilit y 1.98 5.5 2.09 2.97 6.48 8.6 8 18.66 123.63 177.54 -32.31 -96.2 -710.8 24.5 23.19 VAR P VAR Q 2 COV P.Q Role of Price/ Quantity Factors Q Q Q P P De/Stabilizatio n Effect (CP/R) 0.63 2.47 0.75 0.87 1.78 www.zenithresearch.org.in
250.87 559.92 30.69 15.29 44.81 61.52
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SITC-281 SITC-332 SITC-512 SITC-531 SITC-541 SITC-581 SITC-599 SITC-611 SITC-629 SITC-651 SITC-652 SITC-653 SITC-656 SITC-657 SITC-661 SITC-667 SITC-672 SITC-674 SITC-682 SITC-719 SITC-722 SITC-732 SITC-841 SITC-851
15.74 31.11 20.2 7.19 15.17 26.88 18 6.4 19.51 9.04 1.63 11.74 12.67 4.13 15.09 10.09 25.56 26.1 48.55 19.87 21.14 15.09 8.29 9.7
9.44 16.05 2.21 2.1 1.53 4.78 2.99 3.5 8.87 3.26 2.02 5.09 1.36 2.47 3.8 1.14 8.14 4.4 13.6 2.64 4.29 5.05 0.93 2.86
112.98 2.94 43.7 7.15 5.54 21.49 10.5 106.9 3086.4
43.71 111.39 242.55 131.38 104.6 86.55 71.17 216.23 2401
-56.69 -14.33 -186.3 -38.52 -10.14 -8.04 18.33 -223.1 -5387 -2839 -116 -82.72 -78.44 -9.8 14.91 -86.52 -224.8 3.52 -2519 -524.5 -34.78
Q ND Q Q ND Q Q Q P Q Q Q Q Q Q ND Q P Q Q P Q Q Q
1.56 2.67 0.84 0.67 0.45 1.53 0.93 0.97 1.47 1.09 0.65 0.78 0.58 0.48 1.49 0.63 1.74 1.49 2.03 0.58 1.15 1.06 0.47 0.74 www.zenithresearch.org.in
1628.8 1310.5 144.52 81.73 25.52 13.14 6.98 19.59 63.71 53.47 970.5 71.49 100.99 152.91 96.66 78.11 166.92 261.06 43.01 1648.2
403.91 220.54 93.2 41.58
91

SITC-897
21.03
2.55
ND
1.45
Note: Q = Quantity, P= Price, var P = Variance of Price Variable. var Q = Variance of Quantity Variable. 2 COV P.Q = Covariance of Price and Quantity. Source: Comtrade-WITS Database, United Nations. TABLE 5: MARKET-WISE EXPORT INSTABILITY AND STABILIZATION EFFECT: 1991-2006 De/Stabilization Countries IDXi Ri IDXi*Ri CPi Effect (CP/R) Developed Countries Belgium France Germany Italy Netherlands U.K. Canada U.S.A Australia Japan Russia Switzerland Developing Countries Indonesia 22.13 1.22 27.09 1.7 1.39 6.54 7.10 5.89 9.52 10.09 8.71 6.26 6.12 7.35 8.62 15.50 6.63 3.39 2.21 5.31 2.94 2.19 5.59 1.15 18.54 1.04 5.33 3.30 0.89 22.19 15.68 31.26 28.01 22.07 48.7 7.17 113.5 7.66 45.99 51.21 5.87 1.40 0.99 1.97 1.76 1.39 3.06 0.45 7.14 0.48 2.89 3.22 0.37 0.41 0.45 0.37 0.60 0.63 0.55 0.39 0.39 0.46 0.54 0.98 0.42 www.zenithresearch.org.in
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Iran Iraq Saudi Arabia U.A.E. Bangladesh Maldives Sri Lanka China, Peoples Hong Kong South Korea Malaysia Singapore Thailand Latin American countries Others / unspecified Total Trade
13.23 52.05 9.50 8.57 15.02 21.21 8.83 24.04 12.26 17.29 14.08 16.80 9.88 14.35 47.25 8.03
0.77 0.12 1.87 5.79 2.17 0.05 1.45 2.55 5.02 1.27 1.24 2.95 1.27 1.82 15.4 100
10.15 6.5 17.73 49.65 32.57 0.96 12.78 61.22 61.57 21.88 17.39 49.59 12.52 26.18 727.8 1589
0.64 0.41 1.12 3.12 2.05 0.06 0.8 3.85 3.87 1.38 1.09 3.12 0.79 1.65 45.8 100
0.83 3.28 0.60 0.54 0.95 1.33 0.56 1.51 0.77 1.09 0.89 1.06 0.62 0.90 2.97 -
Note: IDXi = Instability Index based on five yearly moving average. www.zenithresearch.org.in Ri = Relative Share in Total Exports Earnings. CPi = Contribution of the Market i in Total Export Earnings. Source: Handbook of Statistic on Indian Economy, RBI (Various Issues). Further, out of the 30 selected commodities, 16 commodities: Fish (SITC-031), Fruits (SITC-051), Tea and mate (SITC-074), Organic chemicals (SITC-512), Synthetic organic dyestuffs, natural industries (SITC-531), Medicinal & pharmaceutical products (SITC-541), Chemical materials and products (SITC-599), Leather (SITC-611), Articles of rubber (SITC629), Woven Cotton fabrics (SITC-652), Made-up articles, wholly or chiefly (SITC-656), Floor coverings, tapestries, etc. (SITC-657), Pearls and precious and semi-precious (SITC-667), Copper (SITC-682), Machinery and appliances-non electric (SITC-719), Electric power
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machinery and switch (SITC-722), Clothing except fur clothing (SITC-841) and Footwear (SITC-851) were found to have strong stabilization effect on Indias overall export earnings. The others more or less causing destabilization of Indias export earnings. On the basis of analysis, it is held that manufactured exports (from SITC-5 to SITC-8) experienced higher export earning instability than that of primary exports (from SITC-0 to SITC-4) (Table 4). The market-wise analysis shows that the developed countries like USA, Germany, Italy, Belgium, France, Netherlands, Australia and Switzerland occupy the lowest position in the instability ranking as compared to the developing countries and found to be most stable markets for Indians exports. Thus, these markets have strong stabilization effect on Indias export earnings during study period. On the other hand, among the developing economies: Indonesia, Iraq, Maldives, China, South Korea, Singapore and other unspecified developing economies are most unstable and prove as excessive contributors to Indias export earnings instability (i.e. have destabilization effect on Indias exports). On contrary to these, other developing economies such as Saudi Arabia, UAE, Bangladesh, Sri Lanka, Honk Kong, Malaysia, Thailand, and Latin American Countries have strong stabilization on Indias exports earnings as revealed by CP/R (having value less than one) during the period under study. However, growth of exports to developing countries found to be much higher than that of the growth of exports to developed countries (Table 5). PRICE/INCOME ELASTICITIES OF DEMAND FOR INDIA'S EXPORTS TABLE 6: ELASTICITY OF DEMAND FOR RICE (SITC-042) EXPORTS: 1991-2006 Country USA Constan t 9.41 (4.37)* U.K 6.49 (5.41)* U.A.E 6.08 (3.76)* JAPAN -15.67 (-1.00) CHINA 6.14 (0.71) PEC -1.48 (-4.24)* -0.98 (-3.24)* -0.49 (-0.86) -2.53 (-3.85)* -2.49 (IEC -1.00 (-0.91) 0.69 (1.15) 1.30 (2.56)* 10.54 (1.34) 0.78 0.24 (0.18) -0.01 R-Sq 0.61 * 0.80 * 0.54 * 0.54 * Adj RSq 0.55 D-W F 10.0 7 26.3 6 N 1 6 1 6 1 6 1 6 D F 13
1.950
0.77
2.380
13 www.zenithresearch.org.in
0.47
0.81-
7.51
13
0.46
1.41
NC
7.5
13
2.780
0.96
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1.35)*** GERMANY -1.44 (-0.46) ITLY -31.93 (-3.23)* BELGIUM -9.33 (-2.07)** SINGAPORE 3.42 (4.34)* HONGKON G 7.07 (3.02)* FRANCE 2.15 (0.79) -1.20 (-2.89)* -0.26 (-0.38) -0.73 (-0.98) -1.94 (-6.65)* -1.26 (-3.35)* -0.88 (-1.79)** 4.18 (2.68)* 19.45 (3.88)* 8.16 (3.60)* 1.91 (4.67)* -0.75 (-0.64) 2.47 (1.80)* * 0.76 * 0.58 2.090 9.03 1 6 13 0.82 * 0.87 * 0.85 * 0.87 * 0.79 1.680 29.4 4 41.6 5 35.6 5 1 6 1 6 1 6 1 6 13
0.84
1.680
13
0.82
2.340
13
0.85
1.31
NC
44.6
13
0.51 *
0.44
2.260
6.82
1 6
13
Note: N = Number of Observations. * Significant at 1 % level. ** Significant at 5 % level. *** Significant at 10 % level. PEC = Price Elasticity Coefficient. IEC = Income Elasticity Coefficients Values in parenthesis are t statistics. www.zenithresearch.org.in Source: Comtrade-WITS Database, United Nations To ascertain the elasticities of demand for India's exports of selected commodities, as many as 314 regression equations have been estimated using Ordinary Least square (OLS) method (results of only two commodities are given here). The coefficients of determination (r 2) have been found statistically significant in 278 cases at various levels of significance. It indicates the strong overall explanatory power of the regression analysis. The analysis signifies that quantity demanded is significantly influenced by either relative prices or income variables or both. In overall, 234 constants coefficients, 250 price elasticity coefficients and 239 income elasticity coefficients turned out to be statistically significant. The presence of positive first order auto correlation has been detected in just three cases; negative first order auto correlation in 56. There is no autocorrelation found in 128 cases and in 116 cases, it remained in the inconclusive range. Thus, all above indicators establish the generally superior fit of the regression equations.
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TABLE 7: ELASTICITY OF DEMAND FOR COTTON FABRICS WOVEN (SITC-652) EXPORTS: 1991-2006 Country USA Constan t 13.50 (15.19)* U.K 17.55 (16.65)* U.A.E 8.07 (32.91)* JAPAN 17.24 (6.88)* CHINA 5.38 (7.35) GERMANY 16.97 (12.88)* ITLY -0.53 (-0.25) BELGIUM 9.90 (3.08)* SINGAPORE 8.85 (15.18)* PEC -0.71 (-7.07)* -0.85 (10.32)* -1.12 (28.94)* -7.76 (10.40)* -0.95 (-3.78)* -0.81 (13.68)* -0.92 (-9.81)* -0.68 (-3.24)* -1.17 (12.07)* IEC -3.00 (-6.70)* -5.16 (-9.71)* 0.25 (1.86)** -5.53 (-4.42)* 1.03 (2.35)* -5.08 (-7.68)* 3.81 (3.58)* -1.56 (-0.97) -1.16 (-3.83)* R Sq 0.94 * Adj R Sq 0.93 D-W 1.32
NC
N 1 6
D F 13
98.22
0.97 *
0.97
0.75-
222.9 6
1 6
13
0.99 *
0.99
2.060
520.9 8
1 6
13
0.95 *
0.94
2.030
112.9 7
1 6
13
0.52 *
0.45
0.66-
7.14
1 6
13
0.98 *
0.97
1.68
257.4 6
1 6
13
NC
0.60 *
0.54
0.77-
9.81
1 6
13
0.96 *
0.95
1.10
NC
144.2 6
1 6
13
96
0.89 *
0.87
1.23
53.00
1 6
13

HONGKON G
7.95 (5.71)*
-0.79 (-3.43)* -1.01 (26.01)*
-0.60 (-0.86) -3.36 (10.23)*
0.68 *
0.63
0.65-
13.56
1 6
13
FRANCE
13.25 (20.33)*
0.99 *
0.99
2.040
684.7 6
1 6
13
Note: N = Number of Observations. * Significant at 1 % level. ** Significant at 5 % level. *** Significant at 10 % level. PEC = Price Elasticity Coefficient. IEC = Income Elasticity Coefficients Values in parenthesis are t statistics. Source: Comtrade-WITS Database, United Nations The analysis highlights that both relative prices of exports and income of the importing countries have great importance in determination of quantity demanded for India's exports of selected 29 commodities in selected 11 markets during the period under study. Apart from price and income factors, this study also highlights the importance of non-price and non-income factors in determining demand of India's exports in several cases. The study rejects the demand deficiency hypothesis as both price and income elasticities of demand for India's exports have been relatively elastic for both primary and manufactured exports. It is clear from the tables 6 and table 7 respectively for the commodities Rice (SITC-042) and Textile Fabrics Woven (SITC652) as elasticity coefficients are more than one in almost all the cases in all the selected markets. The results are similar in majority of the selected commodities. Thus, it is held that demand for India's export has subject to relative prices and income of importing countries during the concerned period (Table 6 & 7). COMPETITIVENESS OF INDIAN EXPORTS The competitiveness of India's exports, during 1991-2006, has been examined at three levels: (a) Relative Prices and Market Share (b) Absolute Prices and Market Share and (c) RCA and RSCA index. The analysis based on the relative prices of India's overall exports and market share indicates increasing price competitiveness of India's exports in global export market as relative export prices of India are decreasing and global market share is consistently increasing since 1991 (Table 8). The analysis based on the absolute prices of India's selected export commodities and their market shares reveals price and non-price competitiveness of India's selected exports during the study period. Decreasing unit values with increasing market shares in case of 13 selected commodities: Fish (SITC-031), Rice (SITC-042), Fruits (SITC-051), Organic Chemicals (SITC-512), Synthetic organic dyestuffs, natural industries (SITC-531), Plastic materials, regenerated cellulose (SITC-581), Chemical materials and products (SITC599), Articles of rubber (SITC-629), Textile yarn and thread (SITC-651), Floor coverings, tapestries, etc. (SITC-657), Ingots & other primary forms of iron (SITC-672), Machinery and www.zenithresearch.org.in
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appliances-non electric (SITC-719) and Footwear (SITC-851) highlights the price competitiveness. On the other hand, increasing unit value with increasing market share in case of 12 selected commodities: Feed-stuff for animals (SITC-081), Iron ore & concentrates (SITC281), Petroleum products (SITC-332), Leather (SITC-611), Textile fabrics woven (SITC-653), Made-up articles, wholly or chiefly (SITC-656), Lime, cement & fabric building materials (SITC-661), Universals, plates and sheets of iron (SITC-674), Copper (SITC-682), Electric power machinery and switch (SITC-722), Road motor vehicles (SITC-732) and Clothing except fur clothing (SITC-841) shows their non-price competitiveness. Three commodities (SITC-074, SITC-541 and SITC-652) showed decreasing market shares and in case of two commodities (SITC-667 and SITC-897) unit value data is not available. TABLE 8: INDIA'S RELATIVE EXPORT PRICES AND GLOBAL MARKET SHARE: 1991-2006 INDIA'S EXPORT YEA RS 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 UNIT VALUE INDEX 89.91 89.98 85.9 87.19 82.52 78.72 89.7 81.93 77.53 76.73 72.38 70.49 79.72 WORLD EXPORT UNIT VALUE INDEX 91.11 93.03 88.29 90.92 99.6 97.59 91.19 86.08 84.12 81.93 78.65 79.66 87.83 INDIA'S RELATIVE EXPORT PRICE INDEX 98.68 96.72 97.3 95.9 82.85 80.66 98.37 95.18 92.16 93.66 92.02 88.48 90.77 INDIA'S GLOBAL MARKET SHARE 0.57 0.61 0.67 0.70 0.70 0.70 0.70 www.zenithresearch.org.in 0.67 0.72 0.78 0.80 0.91 0.93
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2004 2005 2006
89.27 100 105.3
95.52 100 104.5
93.45 100 100.8
0.98 1.11 1.18
Source: Comtrade-WITS Database, United Nations The analysis based on the RCA and RSCA indices reveals competitive advantage in majority of selected commodities. The 24 commodities among the selected ones, in which India has comparative advantage, are: Fish (SITC-031), Rice (SITC-042), Fruits (SITC-051), Tea and mate (SITC-074), Feed-stuff for animals (SITC-081), Iron ore & concentrates (SITC-281), Petroleum products (SITC-332), Organic chemicals (SITC-512), Synthetic organic dyestuffs, natural industries (SITC-531), Medicinal & pharmaceutical products (SITC-541), Leather (SITC-611), Articles of rubber (SITC-629), Textile yarn and thread (SITC-651), Woven cotton fabrics, (SITC-652), Textile fabrics woven (SITC-653), Made-up articles, wholly or chiefly (SITC-656), Floor coverings, tapestries, etc. (SITC-657), Lime, cement & fabric building materials (SITC-661), Pearls and precious and semi-precious (SITC-667), Ingots & other primary forms of iron (SITC-672), Iron and steel bars, rods, angles etc. (SITC-673), Universals, plates and sheets of iron (SITC-674 Clothing except fur clothing (SITC-841), Footwear (SITC851) and Jewellery and gold/silver (SITC-897). On the other hand, among selected commodities, India's comparative/competitive disadvantage primarily lies in six commodities: Plastic materials, regenerated cellulose (SITC-581), Chemical materials and products (SITC-599), Copper (SITC682), Machinery and appliances-non electric (SITC-719), Electric power machinery and switch (SITC-722) and Road motor vehicles (SITC-732) (Table 9). Average RSCA indices for the period 1991-2006 are constructed for selected developing and developed countries (including India). The comparison of Indias average RSCA to 25 selected developing and developed countries shows that India has a competitive advantage in a broader range of export commodities as it (India) ranks very high in case of majority of the commodities except SITC-581, SITC-599, SITC-682, SITC-719, SITC-722 and SITC-732 (Table 11). Further, analysis over the sample period shows that Indias exports has able to remove dependence on traditional export commodities as majority of commodities are manufactured exports having comparative advantage on the basis of resource endowment as revealed by RCA and RSCA indices.
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TABLE 9: ABSOLUTE PRICE, GLOBAL MARKET SHARE, RCA AND RSCA OF INDIA'S SELECTED EXPORTS: SELECTED COMMODITIES (1991-2006) Commodi ty Codes SITC-031 SITC-042 SITC-051 SITC-074 SITC-081 SITC-281 SITC-332 SITC-512 SITC-531 SITC-541 SITC-581 SITC-599 SITC-611 SITC-629 SITC-651 SITC-652 SITC-653 SITC-656 Absolute Price (Unit Value)* 1991 0.31 0.05 0.40 0.23 0.01 0.01 -0.25 0.74 -0.19 0.36 1.34 0.53 0.27 0.07 0.16 0.08 199 6 0.28 0.04 0.15 0.21 0.02 0.01 0.02 0.31 0.64 1.26 0.16 0.32 2.26 1.11 0.29 0.48 0.48 0.44 200 1 0.27 0.03 0.17 0.20 0.02 0.01 0.02 0.22 0.41 1.12 0.07 0.29 1.73 0.49 0.22 0.39 0.59 0.44 200 6 0.29 0.03 0.14 0.22 0.02 0.01 0.05 -0.44 1.40 0.14 0.25 1.84 0.31 0.24 0.72 0.72 0.49 Global Market Share 199 1 2.09 7.36 1.85 20.7 0 2.37 7.71 0.52 0.45 3.21 1.21 0.07 0.31 3.55 0.51 2.41 4.19 1.26 4.19 199 6 3.07 13.6 3 1.75 15.4 4 4.15 5.45 0.47 0.85 4.23 1.07 0.23 0.48 2.09 0.88 6.08 4.98 1.23 6.00 200 1 3.02 9.91 1.88 12.3 7 2.34 4.70 1.44 1.06 5.31 1.02 0.47 0.74 3.01 0.98 5.86 4.90 2.08 6.78 200 6 2.61 14.9 1 1.94 13.1 8 3.77 12.0 1 4.20 1.97 7.47 1.17 0.84 1.04 3.75 1.36 6.69 3.51 2.59 7.07 RSCA Index 1991-2006 3.75 15.92 2.56 21.04 3.92 9.30 1.42 1.25 6.00 1.37 0.44 0.76 3.77 1.24 6.62 6.06 2.20 7.90 RSCA Index 1991-2006 0.58 0.88 0.44 0.91 0.59 0.81 0.18 0.11 0.71 0.16 -0.39 -0.14 0.58 0.11 0.74 0.72 0.38 0.78 www.zenithresearch.org.in
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SITC-657 SITC-661 SITC-667 SITC-672 SITC-674 SITC-682 SITC-719 SITC-722 SITC-732 SITC-841 SITC-851 SITC-897
0.65 0.02 -0.14 0.04 0.42 6.40 0.16 31.19 0.35 0.79 --
0.46 0.02 -0.03 0.05 0.43 1.14 1.07 30.9 7 0.36 0.83 --
0.57 0.01 -0.04 0.04 0.18 0.48 0.66 38.0 4 0.39 0.83 --
-0.02 -0.06 0.09 0.69 -1.05 --0.66 43.8 7
7.02 0.89 12.4 9 0.16 0.15 0.03 0.10 0.11 0.10 2.36 0.69 2.16
7.63 2.26 11.5 8 0.48 0.56 0.07 0.14 0.19 0.17 2.76 1.00 2.99
7.41 3.12 13.7 7 0.64 1.02 0.47 0.25 0.27 0.12 3.02 1.13 5.64
9.87 4.59 14.7 9 2.35 1.87 2.60 0.54 0.77 0.35 3.47 1.67 12.1 1
10.06 3.54 18.30 1.06 1.18 0.63 0.28 0.30 0.20 3.75 1.41 6.32
0.82 0.56 0.90 0.03 0.08 -0.23 -0.56 -0.54 -0.66 0.58 0.17 0.73
Note: RCA- Revealed Comparative Advantage Index. RSCA- Revealed Systematic Comparative Advantage Index. *Absolute Prices (Unit Values) are in US $ Source: Comtrade-WITS Database, United Nations.
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INDIAS EXPORT PERFORMANCE: A CONSTANT MARKET SHARE ANALYSIS TABLE 10: DECOMPOSITION OF GROWTH OF INDIA'S OVERALL EXPORTS (1991-2006) (IN US $ MILLIONS) Actual Years Increase in India's Exports 19912006 19911995 19952000 20002006 19912000 19952006 103326 (100.00) 13777 (100.00) 10708 (100.00) 78841 (100.00) 24485 (100.00) 89549 (100.00) World Demand Effect 44921 (43.48) 8222 (59.68) 9178 (85.71) 36852 (46.74) 15728 (64.24) 44310 (49.48) Commodity Composition Effect -6305 (-6.10) 72 (0.53) -4826 (-45.07) 1050 (1.33) -3639 (-14.86) -8073 (-9.01) Market Distribution Effect 27805 (26.91) 498 (3.61) 22359 (208.81) -415 (-0.53) 15219 (62.16) 42429 (47.38) Residual Competitiveness Effect 36905 (35.72) 4985 (36.19) -16003 (-149.45) 41354 (52.45) -2823 (-11.53) 10882 (12.15) www.zenithresearch.org.in
Values in Parenthesis are Percentages Source: Comtrade-WITS Database, United Nations. The Constant Market Share (CMS) method, as applied to India's exports, is helpful in understanding the behavior of India's exports in world export market and forces underlying the observed export performance. The analysis makes it clear that increasing world demand (World Demand Effect) for exports has played a significant role in the India's outstanding export performance. Apart from expanding world demand, India's export performance has been primarily attributed to competitiveness of exports (Competitiveness Effect) and market distribution of exports (Market Distribution Effect) as commodity composition effect (Commodity Composition Effect) turned out to be negative during most of the time (Table 10).
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CONCLUSIONS AND POLICY ISSUES Based on the above results, it is concluded that India's export performance was outstanding as Indias export growth was much higher than world exports during the study period. India has been unable to diversify its exports as well as export destinations. Export from India has experienced instability primarily in the developing countries. The export instability was primarily attributed to quantity variables during the concerned period. Demand for India's exports was found to be relatively elastic to both relative prices and income of the importing countries. The analysis also reveals that India has a competitive advantage in a broader range of export commodities. The rapidly increasing world demand for India's exports has played a significant role in the satisfactory export performance. Apart from expanding world demand, India's export performance benefited from the competitiveness and market-wise distribution during the study period. The gap between actual growth and potential growth of India's exports is primarily attributed to their competitive strengths. Export promotion measures, adopted by Indian policymakers, have significant effect on its export competitiveness as it would be difficult for exports to sustain competitiveness in this era of global competition and flexible of exchange rate. No doubt, rapidly increasing world demand for exports, as highlighted by the strong world trade effect, has been the outcome of the free trade wave initiated by WTO negotiations and increasing popularity of regional trading agreement during the period. Hence, export friendly environment, provided by export policy reforms with their focus on liberalization, openness, transparency and globalization (outward-orientation) as well as creation of WTO, is crucial determinant of export performance during the period. Developing countries of Asia and Africa have been found to potential markets for Indian exports during the period as export growth to these countries has been recorded very high, but the issue of instability needs to tackle quite consciously. The commodities viz. Rice (SITC-042), Organic chemicals (SITC-512), Synthetic organic dyestuffs, natural industries (SITC-531), Textile yarn and thread (SITC-651), Made-up articles, wholly or chiefly (SITC-656), Floor coverings, tapestries, etc. (SITC-657), Lime, cement & fabric building materials (SITC-661), Pearls, precious and semiprecious (SITC-667), Ingots & other primary forms of iron (SITC-672) and Jewellery and gold/silver (SITC-897) have been emerged as leading export sectors as export growth of these commodities has been very high and level of instability is very low. These commodities incorporate price competitiveness as their absolute prices have been consistently declining and share in world exports has been tremendously increasing. Given the internal and external economic environment, diversification of exports and export destinations would prove advantageous for Indias exports. Dominance of quantity and supply variations in the instability of the majority of the commodities clearly indicates towards the existence of supply bottlenecks operating in the economy for the respective commodities. Global market has been becoming more and more competition based. Provision of export subsidies, tax concessions, tax holidays, duty refund, removal of the restrictions from import technology and raw materials used in export based industries and establishment of Special Economic Zones (SEZs) in India has benefited export by various ways. Appropriate domestic policy reforms would be essential for abolition of domestic supply bottlenecks and for maintaining quality and cost competitiveness of exports in global market. Deepening of reforms into specific export sectors would stimulate India's export; result compositional and geographical diversification; help to remove supply bottlenecks operating in the economy and help improving export competitiveness. More emphasis on rapidly increasing markets in the context of the www.zenithresearch.org.in
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behaviour of price and income elasticities would positively affect the demand for export, and further would eliminate the negative market distribution and commodity composition effects. Controversial issues in WTO framework (especially TRIPs, labour standards, environment standards, SPS-TBT measures, contingency trade policy measures) have put a strain on growth of exports. Proactive approach towards the process of global liberalization launched by the WTO under the auspices of free trade doctrine as well of regionalism would provide more opportunities for the export expansion. REFERENCES Aggarwal, M.R. (1982), Export Earning Instability and Economic Development in Less Developed Countries: A Statistical Verification, Indian Economic Journal, Vol. 29, No. 3, pp. 60-70. Bannock, G., R.E. Baxter, and E. Davis (1992), The Penguin Dictionary of Economics, Penguin Book Ltd., London, England. Chadha, V., and Sandhu, S. (1999). An Analysis of Nature and Extent of Indias Globalization, Foreign Trade Review, Vol. XXXIL, No. 2, July-Sept. Chakraboty, Debashis and Pavel Chakraboty, (2005), Indias Exports in Post WTO Phase: Some Exploratory Results and Future Concerns, Foreign Trade Review, Vol. XL, No. 1, April-June, pp. 3-26. Chennery, (1979); Chennery, H.B (1979), Structural Change and Development Policy, Oxford University Press, New York. Economic Survey (2004-05, (2006-07), Ministry of Finance, Government of India New Delhi. Joshi, V and I.M.D. Little (1996), University Press, Delhi. Indias Economic Reforms 1991-2001, Oxford
Kaur, N. (1993). Indias Exports: An Analysis of Instability and Performance, Ph.D. Thesis, Unpublished, Punjabi University, Patiala. Kaushik, K.K and Paras (2001), Trade Liberalisation and Export Performance in India: A statistical Verfication, Foreign Trade Review, Vol. 35, April- June, pp-12-31. Kavoussi, 1984), Export Expansion and Economic Growth: Further Empirical Evidence, Journal of Development Economics, Vol. 14, No. 1, pp. 241-50.
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Kaundal, R.K (2006), Impact of Economic Reforms on External Sector, Foreign Trade Review, Vol 38, No. 3, April-Sept., pp-72-99.

Krueger, A. (1998), Why Trade Liberalisation is Good for World?, The Economic Journal, Vol. 108, September. Kumar, N (1998), East Asian Crisis and South Asian Growth Prospects, RIS Digest, September 14. Mirjit, Sugata and A.R Chaudhri (1997), Indias Exports, Oxford University Press, New Delhi. Moon, B.E. (1998), Exports, Outward-Oriented Development and Economic Growth, Political Research Quarterly, Vol. 51, No. 1, pp-7-37. Parikh, K. and R. Radhakrishanan (2004-05), India Development Report,, Indira Gandhi Institute for Development Research, Mumbai, pp-155. Ram. R. (1987), Exports and Economic Growth: Some Additional Evidence Economic Development and Cultural Change, Vol. 33, pp- 415-423. Reserve Bank of India (2001-02), Report on Currency and Finance, New Delhi. Srinivasan, T.N. (1998), Indias Export Performance: A Comparative Analysis in Indias Economic Reforms and Development: Essays for Manmohan Singh, I.J Ahluwalia and I.M.D Little (eds.) (1998), Oxford University Press, Great Clandren Street, Oxford, New York. Veeramani. C (2007)), Sources of Indias Export Growth in Pre- and Post-Reform periods, Economic and Political Weekly, June 23, pp-2419-27.
105

TABLE 11: RANKING OF ALL THE SELECTED EXPORTER (BOTH DEVELOPED AND DEVELOPING COUNTRIES) ON THE BASIS OF RSCA INDEX
Developed Countries Netherla nds Russia German y Italy Australi Codes a Belgium Switzerl and U.K Commo dity Canada France Japan USA
Developing Countries Indonesi a Iran 3 22 Banglad esh China South Korea Malaysi a Soudi Arabia Singapo re Sri Lanka Thailan d UAE 9 13 25 14 5 2 24 1 9 2 12 11 1 23 8 www.zenithresearch.org.in 5 25 7 15 9 17 4 7 3 26 17 5 5 24 19 25 Egypt Hong Kong India 4
SITC -031 SITC -042 SITC -051
6 18 4 9
7 16
21 20 19 10 15 26 12 11 16 19 5 15 10 20 24 13 5 25 6 22 26 21
8 23 17 7 2 17 4 15 7 12
8 23 12 8 20 10
6 19
3 14 22 26 25 21 18 11 3 13 2 4 1 17 16 23 18 9 25 22 24 13
7 24 14 3 5
SITC -074 17 10 20 16 SITC -081 SITC -281 3 6 8 3 7 8
14 26 21 11 15 18 9 17 22 16 15 21 19 13 24 10 14 11
6 19
2 20 14 11 7 6 4 24 17
4 26 12 15 23 6 26 19 23 20 1 22
1 10 24 21 13 19 18 16 2 9
1 11
5 18 10 13 22 25 14 12
SITC -332 11 SITC -512 23
8 14 16 2 18 12
2 25 12 18 23 21 1 4
9 10 20 6 13 20
3 16
8 26 15 22 21
106

SITC -531 19 SITC -541 10 SITC -581 21 SITC -599 14 SITC -611
6 21 2 15 1 14 7 21
8 4 8 1
3 15 11 6 4 4 13 9 14 14 12 8 14 7 11 9 8
7 17 7 20 2 22 3 24
1 13 14 26 1 3
4 18
2 12 20
9 23 24 10 22 16 25
9 23 12 11 16 6 26 20 19
5 19 24 17 21 26 13 22 18 25 3 16 12 13 25 10 24
9 15 2 5
5 17 18 23
6 26 17 16 15 11 23 22 19 13 25 10 18 12 20 1 9 8 4 3 14 10 6 13 24 1 1 7 2 3 24 7 24 6 25 7 20 5 24 21 17 19 2 20 25 19 1 7 26 5 18 9 26 8 22 8 13 6 17 www.zenithresearch.org.in
6 20 25 15 7 3
2 22 16 18 23 12 11 8
SITC -629 22 12
4 11 17 21 10 14 26 15 16 23 5 6 5 1 6 3 2 4 4 2 2 8
SITC -651 22 11 20 15 SITC -652 23 10 25 11 SITC -653 23 10 21 9
7 19 17 23 12 16 18 5 15 16 20 13 19 17 4 11 20 24 18 15 19
8 13 25 21 10 9 18 26 21 12 1 16 26 17 14 9 22 26 23 5
3 22 4 5 3
SITC -656 19 10 21 14 SITC -657 18 3 17 10
15 11 25 12 24 18 13 16 11 19 26 4 25 14 7
9 13
6 20
2 12
1 21 23 16 24
8 15 22
107

SITC -661 21 SITC -667 SITC -672 9 9
6 10 11 2 14 17 2 15 1 12 3 4 5 5 8 6 9 5
14
1 18 19 15 24 17 22 26 4 5
4 20 7
7 13 16 12 25 23 3
18 21 15 22 10 11 13 6 10 5 11 3 1 6 10 3 7
8 26 12 24
1 19 25 20 16 23 13 8 16 4
6 11
1 22 14 17 26 12
7 20 9
3 18 23 21 25 19 24 2 21 22 19 25 15 26 6 10 23 13 15 22 25 9 16 25 5 26 8 24 10 21 4 17 6 22 www.zenithresearch.org.in
SITC -674 13 SITC -682 1
4 20 11 14 24 17 18 2 20 16 19 26 17 24 2 7
8 16 23
7 21
9 18 12 14
SITC -719 17 12 13 SITC -722 20 18 15 SITC -732 12 4 1
4 11 19 3 14 21
5 20 14 23 15 18 22 26 8 23
7 12 3 16 15 16 9
2 11 10 24 8
1 19 16 25 13
2 10 17 15
7 26 16 24 18 13 20 22 1 7 3 9 4 2 5 5 6
6 21 23 19 25 11 14 2 8 7 20 5 19 4 7
SITC -841 23 13 21 12 SITC -851 23 SITC -897 9 22 12
8 25 14 24 18 15 19 3 25 11 24 16 13 21 3 21 24 25 1
6 22 10 11 26 17 4 14 10 17 26 20
1 18 8 20
17 18 19 14
9 15 26
2 11 22 12
6 23 13 10
Source: Comtrade-WITS, United Nations.
108

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ZENITH International Journal of Business Economics & Management Research

AN ANALYSIS OF INDIAS EXPORTS (1991-2006)

ZENITH International Journal of Business Economics & Management Research

ZENITH International Journal of Business Economics & Management Research

ZENITH International Journal of Business Economics & Management Research

ZENITH International Journal of Business Economics & Management Research

ZENITH International Journal of Business Economics & Management Research

ZENITH International Journal of Business Economics & Management Research

A Agriculture and allied . products 1 2 3 Tea Coffee Rice

Cotton raw including waste

Tobacco Cashew including

4.55 2.41 8.37 6.92

ZENITH International Journal of Business Economics & Management Research

2.39 3.85 19.2 19.9 2 1 2.43 2.46

6.29 31.6 8 10.7 7 8.04 0.29 9.02 6.45

13 Sugar and molasses

6.04 10.3 8 5.66

II. Manufactured goods A. Leather and manufactures

ZENITH International Journal of Business Economics & Management Research

3 17. 93 21. 05 30. 77 21. 95 1.8 4 1.1 3 4.6 4 2.5 7 100 .0

6 20. 11 28. 03 23. 77 21. 96 0.7 6 1.3 2 8.4 2 2.7 0 100 .0

G. Other manufactured goods II I. Petroleum products

0.94 1.09 2.23 1.48 1.05 1.06 100. 100. 0 0

I Others V. Total Exports

ZENITH International Journal of Business Economics & Management Research

9.65 10.10 19.0 0 4.41

11.4 0 11.90 1.24 8.17 www.zenithresearch.org.in

9.29 11.60 1.30 2.27

ZENITH International Journal of Business Economics & Management Research

5.12 6.37 17.80 58.40

2.92 6.29 18.70 54.40

2.48 5.74 21.30 53.90

1.17 3.47 14.50 33.40

0.86 4.68 17.10 40.40

2.30 8.39 11.6 9.07

6.10 15.7 0 17.6 0 14.9 0

3.95 11.00 3.98 12.60 11.9 0 4.71 7.87 9.71

5.39 50.20 12.4 0 7.44

8.30 15.90 3.96 2.86

ZENITH International Journal of Business Economics & Management Research

Developing Countries Total Others Total

22.30 19.32 100.0 0

26.00 19.61 100.0 0

25.00 0 21.16 100.0 0

19.10 47.53 100.0 0

34.60 25.07 100.0 0

250.87 559.92 30.69 15.29 44.81 61.52

ZENITH International Journal of Business Economics & Management Research

112.98 2.94 43.7 7.15 5.54 21.49 10.5 106.9 3086.4

43.71 111.39 242.55 131.38 104.6 86.55 71.17 216.23 2401

403.91 220.54 93.2 41.58

ZENITH International Journal of Business Economics & Management Research

ZENITH International Journal of Business Economics & Management Research

ZENITH International Journal of Business Economics & Management Research

ZENITH International Journal of Business Economics & Management Research

ZENITH International Journal of Business Economics & Management Research

ZENITH International Journal of Business Economics & Management Research

-0.79 (-3.43)* -1.01 (26.01)*

-0.60 (-0.86) -3.36 (10.23)*

ZENITH International Journal of Business Economics & Management Research

ZENITH International Journal of Business Economics & Management Research

2004 2005 2006

89.27 100 105.3